patrick.net

John Bailo says

My question is...where is all this money coming from?

Funding
Total $2.34B

Angel, 9/04 23
Peter Thiel
Reid Hoffman $500k

Series A, 5/05 24
Accel Partners
Mark Pincus
Reid Hoffman $12.7M

Series B, 4/06 25
Greylock Partners
Meritech Capital Partners
Founders Fund $27.5M

Series C, 10/07 26
Microsoft $240M

Series C, 11/07 27
Li Ka-shing $60M

Series C, 1/08 28
European Founders Fund $15M

Series C, 3/08 29
Li Ka-shing $60M

Debt, 5/08 30
TriplePoint Capital $100M

Series D, 5/09 31
Digital Sky Technologies $200M

Unattributed, 6/10 32
Elevation Partners $120M

Unattributed, 1/11 33
Goldman Sachs
Digital Sky Technologies $1.5B

Something's amiss here - when it comes to the real (i.e. not virtual/cyber) world of tangible things, facebooks value seems purely ficticious. All it can ultimately produce is data/marketing lists that are only of value to advertisers (or perhaps the government in another way). How does the ficticious value of a company that aggregates data/marketing lists on its users compare to real-world value of companies that produce actual, tangiable, useable things?? Under a standard buisness model, a company produces a product or service that the public places a value on thru purchase/consumption. With the facebook business model, the end-user IS the product for which the advertisers place a value via purchase/consumption (ad space, end-user data, etc.). You the end-user purchase/consume nothing from facebook since you are the product. It just doesn't add up...

Haven't you heard? Our economy will no longer be based on buying and selling houses from/to each other, but will now be based on Facebook postings and Twitter ramblings.

We'll all be rich!

I would say the other $97.66B has been created from nothing.

A bunch of people have declared to themselves and others that Facebook shares are worth something rather than nothing. Kind of like printing money.

It does have a negative effect on the rest of us through inflation for sure. We now have to bid against Facebook millionaires for houses and other things.

John Bailo says

So where is the other $97.66B coming from?

Less than 10% of the shares are offered. Zuckerberg and the rest holds 57% (and would likely stay that way to keep total control). The institutions the other 33%. Pensions will be miniscule.

The pension may benefit or lose. Who the heck knows.

This thing is so hot and cannot go wrong.
I plan to buy 1000 shares tomorrow at open.

All these S&P 500 and large cap index funds will jump onto it.
Then George Bush will use social security money to buy some more.

Even Bernanke plans to buy some.

Travis Bickle says

Something's amiss here - when it comes to the real (i.e. not virtual/cyber) world of tangible things, facebooks value seems purely ficticious. All it can ultimately produce is data/marketing lists that are only of value to advertisers (or perhaps the government in another way). How does the ficticious value of a company that aggregates data/marketing lists on its users compare to real-world value of companies that produce actual, tangiable, useable things?? Under a standard buisness model, a company produces a product or service that the public places a value on thru purchase/consumption. With the facebook business model, the end-user IS the product for which the advertisers place a value via purchase/consumption (ad space, end-user data, etc.). You the end-user purchase/consume nothing from facebook since you are the product. It just doesn't add up...

One of these days, i'm gonna get - organiz-ized !

Are you really claiming that advertising isn't a legitimate business?

Patrick: Not really. There are going to be maybe 1000 people who will get enough money out of the IPO to be able to 'compete' on houses, and frankly, the houses they're competing on aren't going to be ones you could have afforded anyway.

Travis Bickle says

Under a standard buisness model, a company produces a product or service that the public places a value on thru purchase/consumption. With the facebook business model, the end-user IS the product for which the advertisers place a value via purchase/consumption (ad space, end-user data, etc.). You the end-user purchase/consume nothing from facebook since you are the product. It just doesn't add up...

More over Commercial products... products (and services) which are never advertised to the general public consumer. You certainly cannot advertize to these end users/buyers using Facebook.

I would say the other $97.66B has been created from nothing.
A bunch of people have declared to themselves and others that Facebook shares are worth something rather than nothing. Kind of like printing money.
It does have a negative effect on the rest of us through inflation for sure. We now have to bid against Facebook millionaires for houses and other things.

I like to buy... i mean take a 1% interest in Patricks website.. I will pay him $10,000 for 1% share of ownership. Therefore the other 99% is worth.. $ 990,000. Patrick is now a millionaire.

Kevin says

Are you really claiming that advertising isn't a legitimate business?

Madison Avenue...doesnt not have a great reputation to be proud of.

legitimate questionable.. shady certainly...

today, your being tracked.. what you say, where you go, what you look at..
because of all this .. someone is selling this to others.. we are whores and they are the pimps..and who pays the pimp but the johns.

John Bailo says

thomas.wong1986 says

John Bailo says

My question is...where is all this money coming from?

Funding

Total $2.34B

So where is the other $97.66B coming from?

anyone who invested with the VC.. could be a super rich rock star.. Mick Jagger or Madonna, or rich industrialist.. George Soros, a rich Saudi oil Prince ... and many others willing to lose their minimum $5M cash investment.

Kevin says

Patrick: Not really. There are going to be maybe 1000 people who will get enough money out of the IPO to be able to 'compete' on houses, and frankly, the houses they're competing on aren't going to be ones you could have afforded anyway.

Yes.. someone HAS to give them money so THEY can BUY that house...

NO money ... No house.... No problem...

thomas.wong1986 says

I like to buy... i mean take a 1% interest in Patricks website.. I will pay him $10,000 for 1% share of ownership. Therefore the other 99% is worth.. $ 990,000. Patrick is now a millionaire.

Thanks! But let's think even bigger.

I'll declare a billion shares, and you buy just one share for $1.

Then I'd be a billionaire, and you wouldn't have to spend as much.

And I'll give you a million shares just for doing that. Deal?

finehoe says

Haven't you heard? Our economy will no longer be based on buying and selling houses from/to each other, but will now be based on Facebook postings and Twitter ramblings.
We'll all be rich!

- Indeed, it just goes to show how capitalism is "the most efficient allocation of resources" humanity has ever known...

Thanks! But let's think even bigger.
I'll declare a billion shares, and you buy just one share for $1.
Then I'd be a billionaire, and you wouldn't have to spend as much.
And I'll give you a million shares just for doing that. Deal?

yes.. add zeros to my figure to get to billions. If you consider I may be a the competition, i just made it very very expensive for anyone to buy you out.

Kevin says

Are you really claiming that advertising isn't a legitimate business?

whould you rather have an engineer working on social networking web pages (Facebook/Lined In) or have that same engineer working on HW/SW products (Intel/Dell/Seagate/IBM/Oracle/GE etc etc that are the backbone of a variety of global industries (Banking/Govt/Aerospace/Heavy Industry/Tech/ etc etc etc.

further more.... after 3-8 years of working at Facebook and/or Linkedin.. where can you move on with your career.

Thanks! But let's think even bigger.

I'll declare a billion shares, and you buy just one share for $1.

You're not going to establish any value if one dollar gets exchanged. A one billion dollar company with normally liquidity moves about 50M dollar daily, not $1.

thomas.wong1986 says

whould you rather have an engineer working on social networking web pages (Facebook/Lined In) or have that same engineer working on HW/SW products

I'll have the engineer work on projects with the higher operating margin, Facebook is around 50%, can't argue the result. I don't think you need to worry about Facebook engineers career prospects as I'm sure their options are wider than normal. Lots of start-up companies will covet that operating margin and they will pay big to create that.

A former FB employees skills are not a "mission critical" job for many F500 companies. .. or any company. More of a dead end.

SFace says

I'll have the engineer work on projects with the higher operating margin, Facebook is around 50%, can't argue the result.

Its advertising.. nothing special. Just looking after a bigger pay off isnt the answer, else you be smuggling cocaine into SF, for a 1000% return.

chanakya4773 says

I don't know about you but most people would take an offer on a house they are selling even if its ridiculously higher than real value

The other side of this is...would the buyer today pay ridiculously higher than real value. Clearly not happening.

SFace says

You're not going to establish any value if one dollar gets exchanged.

The $1 is a valid transaction and valuation until another transaction occurs.

If I pay $200 a day for a hotel room, it doesn't mean that room can rent out for $6000 a month.

If I rent a car for $50 a day, does that car worth $91k?
Assume the car lasts 5 years, $50 * 365 * 5 years.

I've always frowned upon facebook.

Mainly because it's not as great as the sheeple and the media are making it out to be.

Facebook has actually gone way over it's true valuation and worth. I mean - WAY over.

I also hate this tech talk - "valuable platform" - such an overused phrase. Just SHUT UP....

Facebook is nothing special and all the idiots that are investing in facebook are going to lose a lot of money because it currently being way over-estimated for it's assets.

It is an innovation in social networking & advertising but ONLY that. Idiots are prancing around as if it is an innovation in technology itself. It is not!

It is just an innovation in programming for a social networking platform & a database for advertisers. It deserves it's applaud for that.

But it certainly does not deserve anymore applauds beyond that!

This facebook bubble is going to be the next phase coming of the 2nd internet bubble crash.

I don't believe facebook will go bankrupt. But I do believe it will lose a lot of it's bogus valuation. Facebook is not sustainable to be worth hundreds of billions of dollars.

The MOST I would say it is worth would be 5 billion. Don't invest in it. Only the sheep are investing now in facebook. It would have been great to invest in facebook when it was 2004.

But do not invest right now. Wait for it's stock and valuation crash to come - it will go below it's true valuation. Invest during that time so you buy at a steal.

PS. The governments around the world will keep facebook alive for spying purposes and for keeping a database of their peasants. That's another asset of facebook. Other than those things I mentioned, facebook is not really that much of a big valuable asset-rich company at all. Sorry Mark, but I call a bluff where I see it.

MCMSinger says

Facebook is nothing special

The number of users is kind of special. I'd say that even though it's not special, it is.

You could say that electricity or water isn't special, in the sense that it could be provided by different sources. But once a utility has built a monopoly to provide it say to a major metropolitan area, then that is something of value.

Just playing devil's advocate here. I don't love FB either, but I'm on it, and I use it (a little), and I have an academic "facebook group" that's very useful - a closed private group - with students that I don't even have to be "Friends" with, to interact with as a group.

Facebook has built something so big(in terms of users), and that people like (surprisingly), that I'm not so sure it can be taken away from them. It will just adapt, in part based on what the user population wants.

MCMSinger says

But do not invest right now. Wait for it's stock and valuation crash to come - it will go below it's true valuation. Invest during that time so you buy at a steal.

I agree, in that I'm not interested in investing in it. But who knows if and when it will ever seem undervalued. Investing in stocks like Amazon, or Google several years back or Facebook now, that is stocks with values based on sizable expected long term growth, is always a tricky business, and not something I ever felt real comfortable with.

It's like the come-ons you get in the mail about some energy or mining stock that's already gone up 5000 fold in the past 2 years, but they're saying now is the opportunity of a lifetime. Riiiight.

Yeah, more like a selling opportunity for people that bought 2 years ago.

network effects are something aren't they?

John Bailo says

Seriously, isn't Mark just another Bernie Madoff on a gigantic scale

I think so, but timing when it will pop is not possible.